With a collaborative effort of over ten entities, China has launched its most direct and most comprehensive regulatory framework intensifying the government’s crackdown on “illegal” cryptocurrency activity.
While the government had already introduced several bans in 2013, 2017, and May 2021, the most recent set of prohibitions highlights the challenge of closing loopholes and identifying Bitcoin-related transactions. In May 2021, China banned financial institutions and payment companies from providing services related to crypto transactions. The most recent regulatory framework issued a blanket ban on all crypto transactions and mining.
The Chinese government is worried by the increase in ‘mining’ operations as it is hurting global environmental goals due to its high energy consumption. The National Development & Reform Commission stated that it would cut off all financial support and electricity supplies to mining operations.
The government views cryptocurrency as a threat to its financial and economic hierarchy and the sovereign digital Yuan, which is still in its advanced pilot phase.
The news sent the price of Bitcoin tumbling by over 30% in a single day, and the US-listed mining institutes Riot Blockchain, Marathon Digital, and Bit Digital dropped between 2.5-5%. Coinbase global also saw a 1% drop. Despite the sudden drop in prices, analysts believe that this will not have a long-term effect on the growing crypto market.
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